Exam 2: Scarcity, Trade-Offs, and Production Possibilities

In a command economy, how are decisions about how to allocate resources made?

Other things being constant, an economy must give up some consumer goods and services today to produce more capital goods in order to grow.

What does a market economy depend on market mechanisms to do?

What is the term for a system of economic organization in which the ownership and control of productive capital assets rests with the state, and resources are allocated through central planning and political decision making?

In the circular flow model, in what forms do households receive income?

Assume the economy moves from a situation with full employment to one in which the unemployment rate is higher. How can this be portrayed on the production possibilities curve?

FIGURE 2-3 -Refer to Figure 2-3. What is the most inefficient point depicted?

Illustrate a production possibilities curve for automobiles and breakfast cereal that is bowed outward. Show what is likely to happen to the production possibilities curve as a result of a devastating war on a country's home soil.

FIGURE 2-3 -Refer to Figure 2-3. Considering only points on the frontier, at what point will the economy experience the least amount of economic growth over time (ceteris paribus)?

How might an increase in the unemployment rate from 15 percent to 20 percent be illustrated?

Is increased capital spending the only way for an economy to expand its production possibilities curve?

FIGURE 2-2 -Refer to Figure 2-2. Which of the following statements about a movement from Point D to Point C is the most accurate?

Explain how each of the following could discourage economic growth: a.The government closes all of the schools so that more people will be available for work. b.The country fears military invasion and spends half of its income on military goods.

The law of increasing opportunity costs implies that a society's production possibilities curve will be a straight line.

FIGURE 2-3 -Refer to Figure 2-3. What is the most efficient point of production depicted?

Which of the following statements about a production possibilities curve that is "bowed out" or concave to the origin is the most accurate?

Which of the following describes the effect of unemployed resources in the economy?

FIGURE 2-3 -Refer to Figure 2-3. Which of the following movements will result in a decrease in the production of capital goods but an increase in the production of consumption goods this period?

In a market economy, how are resources allocated?

FIGURE 2-2 -Refer to Figure 2-2. What is the opportunity cost of producing an additional cake equal to?